Sharia-compliant succession structures in DIFC and ADGM, explained plainly

The question came before the coffee arrived. A principal in his sixties, born in the Levant and settled in Dubai for more than two decades, with two operating companies, a portfolio and four children, two of them daughters, put it simply: "Is a DIFC foundation halal? My cousin says it is a way to get around the Quran shares."

His cousin had heard something real and drawn the wrong conclusion from it. A foundation can hold assets outside a personal estate, and its governing documents can say almost anything lawful about who benefits. That flexibility can be used to record the fixed shares of Islamic inheritance precisely. It can also be used to do something else. The vehicle does not decide which. The family does, with advice.

We are a corporate services provider, not Sharia scholars and not a law firm. What follows is how we see these structures put together in practice, where the law stands as far as we have been able to verify it, and the questions we send clients away to ask a qualified Sharia adviser and a UAE lawyer before anything is signed.

Without planning, the law already has an answer

For Muslims in the UAE, personal status matters, inheritance included, are governed by Federal Decree-Law No. 41 of 2024 on Personal Status. It entered into force on 15 April 2025 and replaced Federal Law No. 28 of 2005. The federal civil personal status law of 2022 and Abu Dhabi Law No. 14 of 2021 are directed at non-Muslims, so they are not the default for a Muslim family.

The 2024 law sets out the order in which an estate is dealt with: broadly, costs and debts, then any will within one third of the estate unless the heirs consent to exceed that limit, then division of the remainder among the heirs. That division follows the fixed shares, the faraid.

So the default for our principal was not chaos. It was a known distribution, applied by a court, to assets that would be frozen while the process ran. What worried him was less the shares than the rest of it: the months when nobody could sign for the companies, and the risk that the portfolio would be sold in pieces to divide it. Our piece on what happens to a UAE company when the founder dies covers that operational gap in detail.

Foreign Muslims can raise extra questions about which law applies, particularly where their home country does not primarily apply Sharia in personal status matters. Academic commentary on the 2024 law notes that parts of this remain unsettled. That is a question for a UAE lawyer, not for a structuring chart.

"Sharia-compliant" usually means one of two different things

When a family tells us they want a Sharia-compliant structure, we ask which of these they mean, because the drafting is different.

Distribution. The structure gives effect to the Islamic inheritance shares, so that on the founder's death the assets, or the benefit of them, reach the heirs in the proportions the faraid would produce.

Investment and governance. The assets are managed in line with Islamic finance principles: no interest-bearing deposits or conventional bonds, screening of equities, perhaps a zakat policy, and someone with standing to say whether an investment qualifies.

Some families want both. Some want only the second and are content for distribution to follow the default rules through the estate. A few, having taken religious and legal advice, choose arrangements such as lifetime gifts that result in a different outcome, and want the structure to record that decision cleanly. It is not our place to comment on the religious merits of any of these. Our job is to make sure the documents say what the family and its advisers have actually decided.

The tools, and where each one sits

Two things are missing from that table on purpose. A DIFC Courts will is not listed as a tool for Muslims, because the DIFC Courts Wills Service describes itself as a service for non-Muslims and its own FAQ states that it is not advisable for a Muslim to register one. The ADGM Courts notary also offers a non-Muslim wills service, in partnership with the Abu Dhabi Judicial Department. Some practitioners report that Abu Dhabi routes are open to certain foreign Muslims; if a family is considering that, it is exactly the kind of choice that needs both a UAE lawyer and a Sharia adviser in the room first.

The foundation, and what the firewall does and does not do

A DIFC or ADGM foundation is a legal person with no shareholders. Once assets are transferred in, they belong to the foundation. The ADGM Foundations Regulations say so directly in section 32(1): assets vested in a foundation are its assets with full legal and beneficial title, no longer the property of the founder, and not the property of any beneficiary until distributed.

Both regimes also contain what the market calls a firewall. Section 32 of the ADGM Regulations provides that a transfer to a foundation is not void or liable to be set aside by reference to a foreign rule of forced heirship, and that inconsistent foreign judgments are not recognised. The DIFC Foundations Law, as amended in 2024, contains provisions to similar effect on foreign heirship rights and foreign judgments. Confirm the current article numbers against the consolidated text before citing them.

Stated neutrally, those provisions are about foreign law and the courts that apply DIFC or ADGM law. They say nothing about religious obligation, and they are not a statement that Islamic inheritance principles do not matter. How they interact with UAE federal personal status law for a Muslim founder is a legal question we would put to a UAE lawyer rather than answer ourselves.

In our experience, the more useful point for Muslim families is the one a leading private client firm has made in its own published commentary: working with Sharia scholars, advisers commonly consider that where a founder transfers assets to a foundation during life and does not retain the ability to benefit or take them back, the transfer may be treated as a completed lifetime gift, a hiba. That line of analysis tends to push towards an irrevocable foundation in which the founder is not a beneficiary. It can also pull against other goals, such as certain foreign tax treatments that favour revocability. Those tensions are specific to each family and should be worked through with a Sharia adviser and tax counsel, not assumed. Our comparison of foundations and trusts explains the control trade-offs in more general terms.

Where holding companies, gifts and family agreement come in

A holding company on its own does not take assets out of an estate. If the principal owns the shares, the shares pass on death. What it does is reduce many assets to one asset, which makes a faraid division far easier to carry out without selling anything. Share classes can separate voting from economic rights, so that one child runs the business while every heir receives the share of value their entitlement gives them.

Lifetime gifts are the other lever. Families often choose to gift shares in stages, sometimes to all children equally, sometimes to settle a child's share of the business early. Whether a given gift is appropriate, and whether it should be matched for other children, is a religious and family question before it is a corporate one.

Agreement among heirs deserves a mention because it is so often the practical answer. Heirs who know their fixed shares can agree who takes the company and who takes property or cash of equivalent value. The 2024 law's heirs' consent mechanism for wills over one third is one expression of that idea. A foundation or holding company can then carry out the agreed division. What it cannot do is manufacture consent, and we would not document an arrangement where one heir clearly had not understood what they were giving up.

Drafting points we see families get wrong

The most common problem is a by-law that says the council shall distribute "in accordance with Islamic Sharia" and stops there. That sounds clear until the founder dies. Inheritance calculations can differ between schools of Islamic jurisprudence, heirs are only identified at the moment of death, and a council of two professionals is then left deciding a religious question it is not qualified to decide. We now ask for the by-laws to name the school to be followed, state that the heirs and shares are to be determined as at the founder's death, and name who certifies the calculation, usually a specified Sharia adviser or a court-issued determination of heirs, with a fallback if that adviser is unavailable.

Other points worth settling in the documents:

• Investment policy. Write the Islamic finance restrictions into the by-laws or a policy the council is bound to follow, including what happens when a holding stops qualifying, and whether a named screening standard applies.
• The Sharia adviser's role. The law does not require a Sharia supervisory board. Decide whether the adviser's view binds the council or is advisory only, and how the adviser is replaced.
• Council composition. A family member who understands the family's intentions alongside a professional who understands the administration tends to work better than either alone.
• The guardian. In a DIFC foundation, a guardian cannot also sit on the council, so the person the family trusts most has to choose a seat. Confirm the current rule in the Foundations Law. The guardian can be the natural home for oversight of the Sharia provisions.
• Assets outside the structure. Anything not transferred still passes through the estate, so the will and the foundation have to be read together.

Banks will read these documents too. When we open accounts for family foundations, relationship teams often ask for the by-laws and want to understand distribution mechanics before onboarding. A clear, specific by-law shortens that conversation.

Choosing between DIFC and ADGM

For most Muslim families the choice of centre turns on the same factors as for anyone else: where the family lives, where the banking sits, whether Dubai real estate is involved and which courts the advisers know. Our guide to succession structures in the UAE sets out those options, and the ADGM foundation setup guide covers the Abu Dhabi route. If you want to test your facts first, the structure decision tree is a quick starting point.

Working alongside your advisers

Our principal left that first meeting with three instructions: see a Sharia adviser about the gifts he was considering, see a UAE lawyer about the will and the firewall question, and come back when both had reported. He did. The foundation his family eventually set up gives effect to the fixed shares, holds the companies through a holding company beneath it, and follows an investment policy his adviser reviewed.

Atlas Corporate Services establishes and administers DIFC foundations and ADGM structures, and works with the family's own Sharia adviser and lawyers rather than replacing them. Where tax questions arise, we work with GTAG, our sister company within the GTAG/Assetica group, which provides tax advisory services. Private client lawyers and scholars who refer families to us can find how we work with them on our page for advisers.

If your family is weighing these questions, bring what you own and what you want to happen. We will tell you which parts we can build and which need someone else first.